Question 1

In the law when both parties are equally responsible for an illegal agreement, it is known as in pari delicto.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following is the maximum interest rate?

Accepted Answer

A)  20% 
B)  15% 
C)  12% 
D)  10% 
E)  It varies depending on the state involved. 
A)  20% 
B)  15% 
C)  12% 
D)  10% 
E)  It varies depending on the state involved. E

Question 3

Maurice wishes to purchase a small restaurant named "Tasty Burger" in his community from Todd who tells Maurice that, while he loves the teenagers who have frequented his establishment, he is tired of flipping burgers and wants to spend more time fishing on the lake. Maurice has Todd sign a covenant not to compete prohibiting Todd from opening a restaurant within 25 miles of Tasty Burger for one year. Assuming that the covenant was drafted properly, is it likely to be enforced, and why or why not? Also, discuss arguments for and against covenants not to compete in the sale of a business.

Accepted Answer

The covenant is likely to be enforced because it is reasonable and made in conjunction with the sale of an ongoing business. Public policy requires fairness in business transactions, which does not occur when people profit from the sale of a business and then start a new business that destroys the one they just sold. A concern with covenants not to compete is that they restrain trade and may reduce competition. Students may also have other arguments, both for and against, covenants not to compete in the sale of a business.

Question 4

Which of the following is the majority rule regarding a minor's misrepresentation of his or her age?

Accepted Answer

A)  That if a competent party relies on a misrepresentation in good faith, the minor gives up the right to disaffirm the agreement. 
B)  That the minor must restore the competent party to that party's precontractual position before obtaining the disaffirmance. 
C)  That the minor may disaffirm but that the competent party has the right to sue the minor in tort and recover damages for fraud. 
D)  That misrepresentation does not affect the minor's right to disaffirm the contract. 
E)  That misrepresentation results in the minor receiving a return of only half the consideration he or she supplied. 
A)  That if a competent party relies on a misrepresentation in good faith, the minor gives up the right to disaffirm the agreement. 
B)  That the minor must restore the competent party to that party's precontractual position before obtaining the disaffirmance. 
C)  That the minor may disaffirm but that the competent party has the right to sue the minor in tort and recover damages for fraud. 
D)  That misrepresentation does not affect the minor's right to disaffirm the contract. 
E)  That misrepresentation results in the minor receiving a return of only half the consideration he or she supplied.

Question 5

"Irresponsible Teen." At age 17, in a state in which the age of majority is 18, Sally purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted to return it to the store claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Sally claimed was from grape juice. Additionally, a few days before she turned 18, Sally purchased a used car from Dings and Dents used cars. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for six months after she turned 18. Sally then returned the car to Dings and Dents, informed the owner that she was under 18 when she entered into the contract to purchase the car, and told the owner that she was returning the car for a full refund. Dings and Dents claimed the car was a necessity. Sally and her parents disagreed claiming that the parents were ready and willing to provide a car to Sally, and that she only purchased the car from Dings and Dents because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Sally was under the age of 18.
-In the dispute between Sally and the owner of Dings and Dents, which of the following is true regarding the claim of Sally and her parents that the car was a necessary?

Accepted Answer

A)  The claim will have no effect because the law does not recognize the concept of necessaries when minors are involved. 
B)  Social status is irrelevant as a matter of law in addressing a claim that an item was a necessary. 
C)  Whether or not parents would buy the item at issue is irrelevant in addressing a claim that an item was a necessary. 
D)  A minor may not disaffirm a contract for a frivolous matter that is clearly not required. 
E)  Even if a minor disaffirms a contract for a necessary, the minor will still be held liable for the reasonable value of the necessary. 
A)  The claim will have no effect because the law does not recognize the concept of necessaries when minors are involved. 
B)  Social status is irrelevant as a matter of law in addressing a claim that an item was a necessary. 
C)  Whether or not parents would buy the item at issue is irrelevant in addressing a claim that an item was a necessary. 
D)  A minor may not disaffirm a contract for a frivolous matter that is clearly not required. 
E)  Even if a minor disaffirms a contract for a necessary, the minor will still be held liable for the reasonable value of the necessary.

Question 6

Which of the following was the result on appeal in King v. Riedl, the case in the text in which the plaintiffs claimed that the defendant lacked the right to proceed against them for sums allegedly owed because the contractor was not licensed as a residential home builder as required by state law?

Accepted Answer

A)  The court ruled in favor of the plaintiffs on the basis that the contractor was statutorily barred from bringing an action to enforce payment because he lacked a residential home builder license and the amount of the contract satisfied statutory requirements. 
B)  Although recognizing that the contractor's failure to be properly licensed would not in and of itself bar recovery, the court ruled in favor of the plaintiffs because the facts at trial showed that the contractor performed inadequate work. 
C)  The court ruled that because the contractor lacked the required state license and the amount of the contract satisfied statutory requirements, under common law he could only recover for expenses for materials and labor costs, not the full contract price. 
D)  The court ruled that the defendant could maintain an action against the plaintiffs and prevail because the proof showed that he was eligible for the required license although he had not yet obtained it. 
E)  The court ruled that the defendant could maintain an action against the plaintiffs and prevail because the state statute only applied when the cost of a contractual undertaking exceeded $10,000, and because the contractor billed periodically, the plaintiffs were never presented with a bill exceeding $10,000. 
A)  The court ruled in favor of the plaintiffs on the basis that the contractor was statutorily barred from bringing an action to enforce payment because he lacked a residential home builder license and the amount of the contract satisfied statutory requirements. 
B)  Although recognizing that the contractor's failure to be properly licensed would not in and of itself bar recovery, the court ruled in favor of the plaintiffs because the facts at trial showed that the contractor performed inadequate work. 
C)  The court ruled that because the contractor lacked the required state license and the amount of the contract satisfied statutory requirements, under common law he could only recover for expenses for materials and labor costs, not the full contract price. 
D)  The court ruled that the defendant could maintain an action against the plaintiffs and prevail because the proof showed that he was eligible for the required license although he had not yet obtained it. 
E)  The court ruled that the defendant could maintain an action against the plaintiffs and prevail because the state statute only applied when the cost of a contractual undertaking exceeded $10,000, and because the contractor billed periodically, the plaintiffs were never presented with a bill exceeding $10,000.

Question 7

Set forth in detail the test that most states follow regarding the treatment of the capacity of intoxicated persons to enter into contracts.

Accepted Answer

Most states follow the Restatement of Co

Question 8

Which of the following involves overly harsh or lopsided substance in an agreement?

Accepted Answer

A)  Substantive unconscionability. 
B)  Adhesion conscionability. 
C)  Procedural unconscionability. 
D)  Exculpatory clauses. 
E)  An in pari delicto agreement. 
A)  Substantive unconscionability. 
B)  Adhesion conscionability. 
C)  Procedural unconscionability. 
D)  Exculpatory clauses. 
E)  An in pari delicto agreement.

Question 9

"Irresponsible Teen." At age 17, in a state in which the age of majority is 18, Sally purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted to return it to the store claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Sally claimed was from grape juice. Additionally, a few days before she turned 18, Sally purchased a used car from Dings and Dents used cars. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for six months after she turned 18. Sally then returned the car to Dings and Dents, informed the owner that she was under 18 when she entered into the contract to purchase the car, and told the owner that she was returning the car for a full refund. Dings and Dents claimed the car was a necessity. Sally and her parents disagreed claiming that the parents were ready and willing to provide a car to Sally, and that she only purchased the car from Dings and Dents because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Sally was under the age of 18.
-Which of the following is true regarding Sally's attempt to return the damaged dress?

Accepted Answer

A)  In all states Sally has the right to keep the dress and get a refund. 
B)  In all states Sally must return the dress; but she has a right to a full refund. 
C)  Regardless of what she does with the dress, Sally has no right to a refund in any state. 
D)  In some states Sally would have an obligation of restitution to the store. 
E)  In all states Sally would have an obligation of restitution to the store. 
A)  In all states Sally has the right to keep the dress and get a refund. 
B)  In all states Sally must return the dress; but she has a right to a full refund. 
C)  Regardless of what she does with the dress, Sally has no right to a refund in any state. 
D)  In some states Sally would have an obligation of restitution to the store. 
E)  In all states Sally would have an obligation of restitution to the store.

Question 10

"Useless Friend." Charles, who is very gullible, is friends with Bobby. Bobby, who cannot be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has Charles sign a contract promising to wash Bobby's car once a week for a month for $80 per month in payment. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Charles for one year to cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very angry with his former girlfriend, Tessa, and decides to start rumors, that would constitute the tort of defamation, such as that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to enlist the help of Charles in smearing Tessa but knows that Charles would be hesitant to assist in his endeavors. One evening, however, Charles drank too much beer and was clearly intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa, who also happens to be Charles' new girlfriend. He also finally takes a look at the contract involving work for Bobby and tells Bobby that the contract is outrageous.
-Which of the following would be a possible defense to Bobby's contract involving chores based upon the size of the print on the back of the contract?

Accepted Answer

A)  Substantive unconscionability 
B)  Unclear drafting 
C)  Procedural unconscionability 
D)  Outrageous wording 
E)  Adhesion conscionability 
A)  Substantive unconscionability 
B)  Unclear drafting 
C)  Procedural unconscionability 
D)  Outrageous wording 
E)  Adhesion conscionability

Question 11

Which of the following is an element of a legally binding contract?

Accepted Answer

A)  Inquiry 
B)  Acknowledgement 
C)  Capacity 
D)  Knowledge 
E)  Affirmance 
A)  Inquiry 
B)  Acknowledgement 
C)  Capacity 
D)  Knowledge 
E)  Affirmance

Question 12

A party who claims that he or she could not understand contractual terms because of tiny, hard-to-read print on the back of an agreement and the excessive use of legalese is referring to which of the following?

Accepted Answer

A)  Substantive unconscionability. 
B)  Adhesion conscionability. 
C)  Procedural unconscionability. 
D)  Exculpatory clauses. 
E)  An in pari delicto agreement. 
A)  Substantive unconscionability. 
B)  Adhesion conscionability. 
C)  Procedural unconscionability. 
D)  Exculpatory clauses. 
E)  An in pari delicto agreement.

Question 13

A contract of an intoxicated person for necessaries will be enforced for the reasonable value of the necessaries.

Accepted Answer

A) True 
 B)False

Question 14

When must a disaffirmance of a contract based on minority occur?

Accepted Answer

A)  Before or within a reasonable time of the minor's reaching the age of majority. 
B)  Within 30 days of the minor's reaching the age of majority. 
C)  Within 60 days of the minor's reaching the age of majority. 
D)  Within 90 days of the minor's reaching the age of majority. 
E)  Within one year of the minor's reaching the age of majority. 
A)  Before or within a reasonable time of the minor's reaching the age of majority. 
B)  Within 30 days of the minor's reaching the age of majority. 
C)  Within 60 days of the minor's reaching the age of majority. 
D)  Within 90 days of the minor's reaching the age of majority. 
E)  Within one year of the minor's reaching the age of majority.

Question 15

A[n] ______ contract is a contract created by a party to an agreement that is presented to the other party on a take-it-or-leave-it basis.

Accepted Answer

A)  Substantively unconscionable 
B)  Adhesion 
C)  Outrageous 
D)  Procedurally unreasonable 
E)  Unreasonable 
A)  Substantively unconscionable 
B)  Adhesion 
C)  Outrageous 
D)  Procedurally unreasonable 
E)  Unreasonable

Question 16

In the law, when both parties are equally responsible for an illegal agreement, it is known as ____.

Accepted Answer

A)  In pari delicto 
B)  Procedurally unconscionable 
C)  An adhesion contract 
D)  A res ipsa contract 
E)  A stare decisis contract 
A)  In pari delicto 
B)  Procedurally unconscionable 
C)  An adhesion contract 
D)  A res ipsa contract 
E)  A stare decisis contract

Question 17

The term ______ refers to the fact that an agreement is so unfair that it is void of conscience.

Accepted Answer

A)  Unreasonable 
B)  Outrageous 
C)  Unconscionable 
D)  Unrealistic 
E)  Unbelievable 
A)  Unreasonable 
B)  Outrageous 
C)  Unconscionable 
D)  Unrealistic 
E)  Unbelievable

Question 18

Which of the following are contracts that contain multiple parts which can each be performed separately and for which separate consideration is offered?

Accepted Answer

A)  Independent contracts 
B)  Substantive contracts 
C)  Adhesion contracts 
D)  Justifiable contracts 
E)  Severable contracts 
A)  Independent contracts 
B)  Substantive contracts 
C)  Adhesion contracts 
D)  Justifiable contracts 
E)  Severable contracts

Question 19

Which of the following is true regarding the obligation of a minor on disaffirmance?

Accepted Answer

A)  In all states, a minor must return any consideration in his control but is entitled to a full refund of any purchase price regardless of the condition of the consideration when returned. 
B)  In all states, a minor is entitled to a full refund without returning consideration. 
C)  In all states, a minor must return any consideration in his control, must make restitution, and must pay for any loss in value of the collateral. 
D)  In all states, a minor only receives a return of half the minor's investment. 
E)  The obligations of a minor upon disaffirmance vary from state to state. 
A)  In all states, a minor must return any consideration in his control but is entitled to a full refund of any purchase price regardless of the condition of the consideration when returned. 
B)  In all states, a minor is entitled to a full refund without returning consideration. 
C)  In all states, a minor must return any consideration in his control, must make restitution, and must pay for any loss in value of the collateral. 
D)  In all states, a minor only receives a return of half the minor's investment. 
E)  The obligations of a minor upon disaffirmance vary from state to state.

Question 20

A person who has legal ______ to contract is one who has the mental ability to understand his or her rights and obligations under a contract and, therefore, will presumably be able to understand how to comply with the terms of the agreement.

Accepted Answer

A)  Capacity 
B)  Understanding 
C)  Ratification 
D)  History 
E)  Consideration 
A)  Capacity 
B)  Understanding 
C)  Ratification 
D)  History 
E)  Consideration

Exam 16: Capacity and Legality

In the law when both parties are equally responsible for an illegal agreement, it is known as in pari delicto.

Which of the following is the maximum interest rate?

Which of the following is the majority rule regarding a minor's misrepresentation of his or her age?

Which of the following was the result on appeal in King v. Riedl, the case in the text in which the plaintiffs claimed that the defendant lacked the right to proceed against them for sums allegedly owed because the contractor was not licensed as a residential home builder as required by state law?

Set forth in detail the test that most states follow regarding the treatment of the capacity of intoxicated persons to enter into contracts.

Which of the following involves overly harsh or lopsided substance in an agreement?

Which of the following is an element of a legally binding contract?

A party who claims that he or she could not understand contractual terms because of tiny, hard-to-read print on the back of an agreement and the excessive use of legalese is referring to which of the following?

A contract of an intoxicated person for necessaries will be enforced for the reasonable value of the necessaries.

When must a disaffirmance of a contract based on minority occur?

A[n] ______ contract is a contract created by a party to an agreement that is presented to the other party on a take-it-or-leave-it basis.

In the law, when both parties are equally responsible for an illegal agreement, it is known as ____.

The term ______ refers to the fact that an agreement is so unfair that it is void of conscience.

Which of the following are contracts that contain multiple parts which can each be performed separately and for which separate consideration is offered?

Which of the following is true regarding the obligation of a minor on disaffirmance?

A person who has legal ______ to contract is one who has the mental ability to understand his or her rights and obligations under a contract and, therefore, will presumably be able to understand how to comply with the terms of the agreement.

An Introduction to Dynamic Business Law

Business Ethics

The US Legal System

Alternative Dispute Resolution

Constitutional Principles

International and Comparative Law

Crime and the Business Community

Tort Law

Negligence and Strict Liability

Product Liability

Liability of Accountants and Other Professionals

Intellectual Property

Introduction to Contracts

Agreement

Consideration

Legal Assent

Contracts in Writing

Third-Party Rights to Contracts

Discharge and Remedies

Introduction to Sales and Lease Contracts

Title, Risk of Loss, and Insurable Interest

Performance and Obligations Under Sales and Leases

Remedies for Breach of Sales and Lease Contracts

Warranties

Negotiable Instruments: Negotiability and Transferability

Negotiation, Holder in Due Course, and Defenses

Liability, Defenses, and Discharge

Checks and Electronic Fund Transfers

Secured Transactions

Other Creditors Remedies and Suretyship

Bankruptcy and Reorganization

Agency Formation and Duties

Liability to Third Parties and Termination

Forms of Business Organization

Partnerships: Nature, Formation, and Operation

Partnerships: Termination and Limited Partnerships

Corporations: Formation and Financing

Corporations: Directors, Officers, and Shareholders

Corporations: Mergers, Consolidations, Terminations

Corporations: Securities and Investor Protection

Employment and Labor Law

Employment Discrimination

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

The Nature of Property, Personal Property, and Bailments

Real Property

Landlord-Tenant Law

Insurance Law

Wills and Trusts

Filters